During the year, Parent Co sold goods to Sub Co for $120,000. Parent Co applies a mark-up of 20% on cost. At the year-end, one-quarter of these goods remained in Sub Co's inventory. What is the provision for unrealized profit (PUP) that must be eliminated in the consolidated financial statements?

1. Value of goods remaining in inventory = $120,000 × 1/4 = $30,000. 2. The goods were sold at a mark-up of 20% on cost. This means Cost = 100%, Profit = 20%, Selling Price = 120%. 3. The unrealized profit (PUP) in the remaining inventory is $30,000 × (20 / 120) = $5,000. This amount must be deducted from consolidated inventory and consolidated retained earnings.